SPEAKER_00 0:16

Okay, today, Mena, I would like to talk about describing your business or really business model more correctly in just four sentences. I know it sounds like a strange thing, but you know, those four sentences should cover things like why your customers come to your business, how you deliver your product or service profitably, consistently with high quality, how target customers or target clients find you, and how you scale while maintaining quality. These are the sorts of things that, you know, obviously trace back to the Vert flywheel pillars. To explain anything really simply, you've got to understand it very, very well. In fact, to make something super, super clear, you absolutely need to understand the intricacies. And that's the thing with business models is people can talk about their business and they'll ramble on and talk about half an hour, like this is what my business model is, this is what my growth strategy is, this is how I find clients, this is how I attract team members. But it's a kind of a rambling half an hour speech. It doesn't really give any clarity. Whereas explaining or being forced to explain your business model in only four sentences absolutely demonstrates that. So it's not a marketing statement and it's not an elevator pitch. You might have come across those two terms before. It's really about what your business model is. And that clarity helps you stop wasting time on energy and money on activities that really don't fit within that strategy. So you can use it to kind of filter out all the things that you shouldn't be focusing on and really laser in on the key areas that are fundamental to your business. And it's interesting because a lot of business owners can't do this. And it's this sort of work, it's unstructured work that is the important work as a business owner and founder that is, you know, incredibly important for us to do. So quite often we're, you know, looking at operations or dealing with team members or training or going into this sort of very structured work, but really making sure that we sit down and understand what is our business model, what is our business strategy, and can I clearly articulate that to someone that doesn't know a lot about my business? That is absolutely core and key. And that's what we want to talk about today. It's not a simple task, but it's a very important one. So, Mina, let's talk about these four questions in more detail.

SPEAKER_01 2:31

So the first question comes down to the value. So, why would the right customer choose you and be willing to pay for your product or service without a discount? So, the real easy way to put this is if you had to defend your price to a complete stranger, someone that hasn't used your product or bought your product or used your service before, could you do it in one sentence? And it can't be along the lines of because we work hard or because we care. Because everyone, I would argue in business probably works very hard and they care a lot. That's not really your value. It really needs to be something distinctive. So something that is really different to any other business that's out there. So if I use a service that's probably highly commoditized, like a gym, right? There's a lot of competition out there, there's a lot of gyms out there, but a boutique gym might charge three times the price of a sort of box gym that is one of your 24-7 providers and so forth. And people might be willing to pay for those at that triple that price, only because they're getting a better service. They've got smaller class sizes, they've got a more intimate relationship with their trainers, their trainers know them by name, they're tracking their performance, their ability to lose weight, gain muscle, whatever it is. People are paying for certainty. They're not just paying for fitness. So it's one of those examples where you really need to focus on what distinguishes you from the rest. And the way I always put it is if you were to raise your price by 10% today, would you keep the same customers or are they going to be price sensitive and move on? And if that's the case, then you really haven't established a good value for customers. Now, the next question that you've got to ask yourself is around the engine. So, how do we make money without burning out or going broke? Now, this is really the how behind the why. It's your delivery model, how you can actually produce things at scale without sort of trying to please the multitude. So if you think about, for example, a restaurant, a restaurant with a large menu is really just trying to please the crowds. It's really not something that you're going to get a lot of scale in as you're really relying on volume. You're going to have a high level of wastage, that business can go broke very quickly. Whereas a restaurant that has five to ten products on their menu reduces their level of waste, makes sure that they do it really well and they've got an engine behind it. They know how to do those five to ten products really well, perfectly each time in a set time frame, and they know how to order to reduce wastage and so forth. So it's not about working harder, it's really about working smarter. The next one is around reach. So how do people actually find you? Now, reach can really be something quite expensive if you're doing it the wrong way. So a lot of people, for example, pay for social media ads, you know, for example, the meta ads can rack up very quickly as well as your Google advertisements and so forth. And if you're really relying on that for your conversion, it can be quite costly. So you really need to understand how you can find the right people that will actually come to your business and also talk about your business. Now, if you're in a service-based business, let's use an accounting practice, for example, if you rely on 80% of your clients just using word of mouth, then that's a bit sensitive because all it takes is a couple of bad apples, a couple of bad reviews, and then all of a sudden you don't have that same reach. So it's finding the reach strategy that suits your business the most without costing you a whole lot of money. Now finally it comes down to the team because you could build value, you could have a great engine, but if the team behind you don't understand the how and the why, then you can't really scale. The standards drop and you've got a real problem in your business. So how do you keep the same standard as you grow? Is it really founder dependent or do you have any particular bottlenecks in your business? Now you really got to ask yourself, we've spoken about this in previous podcasts, can you step away from your business for a few months and keep up the same sort of standard in your business, in your product or service? Is there going to be any bottlenecks that show up? Are you going to be called every second day just to solve a particular issue? So it's really important for you to focus on how do you establish standard operating procedures, SOPs, to basically deliver and understand how to deal with problems in your business and deliver a same consistent product that beats the rest. Now, none of these four sentences are really trick questions. They're just questions that most of us haven't necessarily asked ourselves in our own business. So maybe you can give us an example, Shuart.

SPEAKER_00 6:33

Thanks, Mano. I think it's really good to consider examples because it really kind of sends this message home. And I'm going to use Apple as a business as an example. It's very well known, of course. And, you know, I think it's got a very clear business model. And so I think once you pull it apart, it kind of makes sense. So from Apple's perspective, their value kind of statement or sentence that would describe that they're offering their customers a clear, simple, reliable, end-to-end cohesive solution. You know, whether it's using the iPhone or whether you're using a Mac or whatever sort of product they've got. It's very simple, it's intuitive. You know, they don't sell a user guide with it. In fact, a lot of products don't sell a user guide with it anymore. But they were certainly one of the first. And you don't need additional software, you don't need to make any choices all set up for you. And you just go away and start using. Of course, you can download apps to enhance the experience, but they've really understood the client experience. And the bonus with respect to value is status. I mean, status is a big one with Apple, you know, that's why they sort of came out with the white-colored corded earphones. You know, there's old earphones you don't really see anymore. That was just a way of Apple showing their brand or the illuminated Apple symbol on the lid of the notebook. You know, they don't have the illumination anymore, but again, it's another way of branding and using status. Their engine is really around controlling the ecosystem, locking it down, and really being the gatekeeper to that. So, you know, with Apple, you've got to go through the App Store to typically to add applications, certainly onto your phone, but onto MacBook as well. And they really control that ecosystem. So they're maintaining the, I guess, the quality and they're the gatekeeper for that experience. In terms of reach, you know, Apple used events and TITA supply, product supply, really to their advantage. Doesn't happen as much anymore, but when a new iPhone was being released, you remember on the that'd be on the news with people sleeping overnight out the front of the store and really constraining supply to ensure that people felt like demand was or supply was very scarce, and so there was always that demand. They've also used cultural visibility and status and brand to their advantage. Again, with the color of the headphones and the branding and the understanding of product, even the pricing approach is all about status and branding and these sorts of things. Also, their shareability is built into the product. So if we think about iMessage, for example, and we know we're going back a few years now, like 10 years ago, text messaging was expensive. You'd used to pay for every text that you sent. And iMessage was an answer to that. But iMessage is only great if, and if you got group messages, only great if all your friends are on Apple as well. So, you know, that shareability is kind of built into the product design. And in terms of team, they've always had ruthless prioritization and focus, and they've got a strong cultural value of believing that the quality of their team is more important than the quantity. And we've spoken about it previously, but the investor relations team is, you know, a third of the size of any normal business. They believe that if you hire well and you hire high quality team members, you don't need as many of them. And that's their ability then to build leverage into their products and then deliver on better outcomes. Although you can certainly mount a case that they, in terms of product innovation, they've kind of let themselves down a little bit, I guess, over the last few years. But you could turn each of those four pillars into one sentence, but it's very clear how Apple does it differently to say Samsung or, you know, any of their other technological or software competitors and really sets themselves apart from their competitors and having that clear understanding of how we're doing it differently, and might not be different to everyone else, it might be the same, that's fine. But how are we going to execute on all those four pillars and explain it in very simple terms very clearly? And I guess the argument is that if you can't explain it simply or clearly, it's either because you don't understand it fully or maybe it doesn't exist. So, you know, going back on what Mina said in terms of reach, you know, if your answer is we rely on referrals, that's not really a strategy. That's a hope. You know, that when I started Pro Solution more than 20 years ago, that's exactly what I was thinking. Just do a good, great job for people and naturally going to tell other people and that's how you build a business. Well, how naive was I? I mean, that's just ridiculous. I mean, of course, it does happen, but it's not something that you're in control of, of course. And you certainly aim for it, but that's not that's not a strategy. That's just a consequence of delivering value. A reach strategy really needs to articulate okay, how are you gonna cut through, how are people gonna find you, and how are you gonna find them and interrupt their day and inform them that you exist and that you can help them. So all right, Maina, let's talk about how we can put these four sentences into action.

SPEAKER_01 11:33

Thanks, Stuart. So, what we really, really got to focus on at the moment is strengthening the weakest link first and not try to aim for all four at once. It's a common misunderstanding that, you know, we'll seem busy and focus on all of those pillars all at once just to seem busy and try to get a quick outcome, but instead you're just doing all those things really badly. Whereas if you focus on the one item and do that well, then you can then go on to the next items and deliver even more value. So the way I put it is through an easy analogy. So think of a table with a short leg, and we've all experienced these at certain restaurants and so forth. You don't send all four legs evenly to try to get it to sort of sit evenly. You work on the shortest leg first. So it's the same thing in business. You basically try to work on your weakest link first. So think about if you're a business owner and you're trying to simultaneously run a rebrand to sort of establish value or hire five people at the same time as you're sort of trying to establish that value or that rebrand and launch paid ads for your reach campaign and renegotiate sort of contracts for your engine and so forth, all in the same time. You're not gonna do any of those items at a hundred percent. And what's gonna end up happening is nothing will get proper attention. And six months later, nothing's actually really improved. You've just made yourself a whole lot busier, introduced a whole lot more stress into your business and achieved no outcomes. So I'd like to sort of highlight again that this isn't set in stone, but a particular order that we would recommend for our clients to go down if they're trying to sort of ascertain or improve their strategy overall. And the first is to focus on the value, establish your why and how you can position yourself separately from the rest of your competitors. Then comes your reach, how you're going to actually get to your target customers, then your engine, and then finally your team. Again, this is a starting point and not a rule, because you might actually be in a business that your value is spot on. You know, you've already set yourself apart from the rest of your competitors. You just need to focus on the other pillars of your business. So you need to establish what you're going to work on first, what your weakest link is. And again, I can't stress this enough. Busy is not the same as productive. So doing a little bit on all four at the same time will just make you feel like you're being responsible and know where the shortfalls in your business are. But it's just a comfortable way to avoid any real hard conversations in your business. You really need to be truthful with yourself as to where your weakest link is and how to work on it. There's a saying that nothing kills more small businesses than more sales. Can you tell us a bit more about that, Stuart?

SPEAKER_00 13:57

Absolutely, Amina. And I think that's quite often, and this is why we mention it, quite often, that this is the thing that a lot of business owners think that they need to do or focus on to really build their business. They quite often think, okay, I've got the business, I did a certain amount of turnover or product sales or whatever, however you want to measure it last year. And to make more money or to build my business, I need to do more, you know, X times 30% or plus 30%, for example, this year. And they just think feeding in more volume is the answer. But it's rarely the answer, in fact. I think typically most businesses' weaknesses tend to be in either engine or team. And it makes sense, right? Because value is probably the bit that, at least if they're new to the business, so it's a newly established business, typically value is the first thing that attracts someone to a an industry or a business. They think of a better way to do things or a certain target customer or cohort to target with a specific service or a specific product. Or it could be even, you know, importing a new product into Australia for a particular use, for example. It normally starts, the idea normally germinates with value. And so when someone gets into business or starts a business, that's the first thing that they sort out and they deliver upon. And certainly when they start the business, normally they're in charge of delivering that value as well. So they make sure that they work it out. And then because they've been successful at delivering value, it's more often than not, their customers are talking about this, they're providing remarkable service, you know, worthy of remark. And so they've got a certain level of business coming through. So the things that break first then are team and engine. And that's the thing that tends to sort of stop more businesses. But if you then throw more volume in a business that with a weak engine or weak team, it's just going to break. It's going to blow up. You know, if the engine's not robust enough, you're going to upset customers, your quality is going to suffer, the time to deliver the product or service is going to suffer. It's going to buckle under pressure. If you've got a weak team, same sort of thing is that, you know, you'll end up being, as the founder, the sole source of answers to any questions. You won't be able to delegate effectively or reliably. You know, you'll still be on the hook pretty much for everything that goes on in your inside your business. And you're the one that's probably going to burn out and fail. So I think, you know, the the natural reaction is yes, I need more business to grow my business, I need more customers. That's a natural way of thinking. But we'd like to push back on that today and really invite you to think about of the three remaining pillars, excluding reach, which one do you think is your weakness? Where do you think your weakness is? And you've got to be really brutal, I guess, particularly with respect to team. And Minor and I have mentioned this in previous episodes. But a great question is, would you enthusiastically rehire everyone on your team? And I underline enthusiastically. Are they doing what you need them to do? Do they hold themselves accountable for achieving KPIs? Do they deliver with an acceptable error rate? These are the sorts of questions you want to ask. And you've got to be honest about it because quite often founders don't really want to face the truth because changing the team, you know, sacking someone and replacing them, it's a lot of hard work. It comes with a lot of risk, a lot of energy needs to go into it. So quite often we kind of try and work around it and almost avoid it, but try not to do that. So I think if there's one thing we'd like to leave you with today is really try and interrogate those three pillars. Reach is important, but what I'm saying is don't just think adding more customers is the answer to generating more or better sustainable, more reliable profits or growing your business. But also, many we can use these four sentences to really obtain better focus and say no more often.

SPEAKER_01 17:45

Now, it might be something unfamiliar to you to say no in your business. And I know as a small business owner, you're very much inclined to say yes a whole lot of the time just to appease your staff or your customers or or anyone really, just to get things ticking long, the dolls through the door and so forth. You're really cutting yourself short by doing so. Before you say yes to anything, and yes to any of those questions that we've raised, those four questions, such as, you know, whether a client high a client or a hire or a new service line, whatever it is, before you say yes to anything, you really got to ask yourself two honest questions. Which of my four sentences does this actually help? And what will actually improve because of it? And if you can't answer both, then or just answer yes to one and and not the other, then it's a straight no. You shouldn't focus on this. So what I like to do lead by an example is around sort of custom work. So in all of our industries, whether it be a service-based or or a product-based industry, sometimes we get a request for custom work. So if I go back to the restaurant, for example, now you might get a lucrative offer to produce something that's highly customized, might seem really, really good, and you might be attracting a really good premium fee for it. Now, this could go against your value proposition. It could go against what your team knows how to do or what they're trained to do. And as a result, what could end up happening is you produce a subpar product or service. Now, that doesn't benefit anyone. It affects your why your value, so your why, and it affects your team's morale because you've just produced something that's not of their caliber or their expertise. So you really got to be honest with yourself and be willing to say no to any sort of proposition that comes your way if it doesn't suit your business. So if I use our accounting business as an example, it's the same discipline I apply to my clients. Now, if my client comes to me with extra scope, so they've basically just engaged us hypothetically for just accounting and tax services to produce a set of financial reports and tax return. But now they want us to do business advisory or a piece of work around evaluation or something like that. Now, that's well within our service lines, but we've got to ask ourselves, does it actually strengthen our position? Do we really get to add value to our client's position by offering it to them? And am I being rewarded for that service line? If I can answer yes to all those questions, then I would offer it to that client. Whereas if they ask me, for example, to do legal work for them, although I can probably make way or try to make way with certain legal work, it's not our expertise. We should refer that on. So it's about being honest with yourself and your clients as to what you can deliver.

SPEAKER_00 20:16

Absolutely, Amina, and that's why these four sentences help us really focus and say no to the things that aren't really going to help us. So, for example, if I go back to my old Apple example, their success depends on standardization and control of their platform and ecosystem. So, of course, anything that would fragment that or custom hardware requests or one-off software concessions, distribution deals, all that sort of stuff might drive short-term profit, but at the cost of long-term value. So it makes sure that we remain focused. I guess over the next week or so, a little bit of homework, you know, something to really think about is firstly, you've got to test yourself can you describe your business model in four sentences? Do you really understand it? If not, you've got to really interrogate it a little bit more. Of course, keep listening to this podcast. We'll provide you tools to help you do that. And then once you've really understood what your four sentences are, your description, which bit is the weakest and you know, where should your focus be? Okay, so over the last few weeks, we've presented the vert flywheel methodology and we're gonna keep talking about it, of course. Over the coming weeks and months, we're gonna talk about value. So the first pillar in that vert flywheel. Of course, when after we've done that, we'll talk about all the other three pillars. And as I said, we're gonna give you some tools and resources to try and help you get more and more value. Now we're gonna be hammering you with lots of ideas and strategies and tips and these sorts of things, but you know, just be careful. We don't expect and we don't recommend that you follow all of them. It's really you've got to pick the ones that you think are going to be appropriate for your business. And again, that that clarity brings focus and that focus brings better results. So, as I said, next week we'll start talking about value, and we look forward to joining you then. Bye. Bye for now.